Why is Nevada short on cash?

After Nevada increased taxes in 2003 (new revenues were collected for FY 2004) Nevada's government rode atop a booming revenue source that was riding atop a booming economy. As a result, general fund revenue collections increased 28 percent, and overall government spending increased 17.6 percent.

Nevada's policymakers went on to spend every dime and assumed the good times would continue. This is not just a rhetorical claim – it is the very reason we have a general fund revenue shortfall.

Nevada assumed that it would collect $3.5 billion for the 2009 fiscal year. Today, that number is estimated to be down to $2.9 billion. The shortfall is the difference between what they thought they would collect and reality.  The graph below (adjusted for inflation to 2008 dollars) demonstrates that reality.

In reality, the economy slowed and the value of the U.S. dollar weakened due to inflation. Nevada's budget shortfall was the direct result of overspending in the good times while assuming our ballooning economy would never lose any air.

Trying to keep Nevada's government spending up like it's the good times all over again is not only unrealistic, it is irresponsible.

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